Related Articles

Many small-business owners find a monthly cash budget and a monthly cash budget analysis an essential tool for managing and staying on top of business expenses. A cash budget uses information from the most current income statement and balance sheet as well as revenue projections to create spending estimates for the next 30 days. Comparing spending estimates to a balance sheet of actual monthly spending helps a small-business owner determine whether or not spending is in line with budget expectations.

Manual vs. Electronic Balance Sheet

Although it’s certainly possible to use a manual system and a paper-based spreadsheet to track monthly spending, many business owners find an electronic spreadsheet system more useful. An electronic spreadsheet can not only increase data entry accuracy and the accuracy of mathematical calculations but can also increase data analysis options. For example, spreadsheets allow for sorting and for selecting data based on specific criteria. They can also be used to analyze data using "what-if scenarios, which allow a user to change a single variable and immediately view the effect on other variables. Once the balance sheet is complete, electronic spreadsheets allow a user to view data in a variety of graphical formats, such as line, bar and pie charts.

Monthly Budget and Balance Sheet Format

A balance sheet can be incorporated into the monthly cash budget. Not only does this make creating a balance simpler, but it also facilitates the budget analysis. Start by creating a spreadsheet consisting of four columns. From left to right, add item, budget, actual and variance column labels. List cash expense budget items and spending estimates or projections in the first two columns. After preparing monthly financial statements, enter the amount of cash actually spent during the month in the third column. The fourth column will be used to analyze monthly spending.

Calculate Monthly Budget Variances

Compare actual and budgeted expenses by showing the variance in column four either as a dollar amount or the percentage of difference. Get the percentage by dividing the amount actually spent by the budget estimate. For example, if actual payroll expenses total $8,200 and the budget estimate was $7,500, the variance is $700, or depending, on how you choose to display it, 1.09 or 109 percent. Calculate a variance for each budget item as well as for total cash expenses and the ending cash surplus or deficit.

Balance Sheet Analysis

Review the balance sheet to see to which expenses were on track and which exceeded the budgeted amounts. Analyze amounts that exceeded expectations, asking questions such as whether spending estimates were complete or whether estimates were missing material, labor or other components of the expense. Analyze revenue projections to determine whether projections were realistic and check accounts receivable to see whether adjustments for uncollectible accounts receivable need to be entered. Check payroll to make sure budgeted payroll expenses included payroll taxes. Use analysis information to create a cash budget for the coming month that will balance more exactly.

About the Author

Based in Green Bay, Wisc., Jackie Lohrey has been writing professionally since 2009. In addition to writing web content and training manuals for small business clients and nonprofit organizations, including ERA Realtors and the Bay Area Humane Society, Lohrey also works as a finance data analyst for a global business outsourcing company.